All posts tagged Nymex Crude

With Nymex WTI crude oil jumping nearly 3% to $102 a barrel and Brent crude off a bit today, the Brent-WTI spread has fallen to its lowest level since May.

The gap between the two measures of crude oil was recently down to $9.37, the lowest since May 10.

Liam Denning over at the new Overheard blog explains it all, pointing out that ConocoPhillips is selling its stake in a key pipeline that was causing a lot of the oversupply of WTI at Cushing, Oklahoma, that had kept prices low:

This is utterly meaningless aside from psychology, because Brent crude — the true benchmark for how many limbs we will need to saw off and swap for a few droplets of sweet, sweet gasoline — has been above $100 forever.

But it will make the evening news and freak everybody out a little bit, neutralizing the effect of the drop in CPI, so there you have it.

Dow futures are down a little more now, off 95 points, with S&P futures down 13 points.

Brace yourselves, Nymex crude oil is about to hit $100 a barrel again.

At last check, Nymex crude was up 0.8% to $98.58 a barrel.

The good news is that this is purely psychological, as Nymex West Texas Intermediate crude has lost its luster as a benchmark.

The bad news is that the current benchmark, Brent crude, has been above $100 for most of the year. Brent matters more for most American drivers than the West Texas Intermediate crude traded on Nymex. It was recently up 0.5% at $114.28.

Nymex crude oil is up again today, to more than $96 a barrel, working on its highest close since the end of July. Some of this might have to do with just a bit of anxiety about Iran.

Crude oil already had plenty of reasons to rise, apparently, gaining 27% since the beginning of October. Recession-avoidance, global central-bank liquidity and a too-wide spread between Nymex and Brent crude all contributed to the run-up.

The price gap between the world’s two main oil benchmarks widened to a record level Friday after the Dow Jones-UBS Commodity Index said this week that it will add Brent crude, the European crude benchmark, to its index starting in 2012, analysts said.

Previously, WTI crude, the U.S. crude benchmark, was the only crude included on the index. But Brent will now account for one third of the index and WTI for two thirds, meaning that index managers will have to reduce the amount of WTI futures that they hold and start buying some Brent futures, said Olivier Jakob, an analyst at Petromatrix.

This move will pressure the price of WTI futures lower and support the price of Brent futures, which will see higher demand, Jakob said.

Earlier, the spread reached $28.07, 19.2% higher than it closed Monday, before Dow Jones Indexes made the announcement.

The decision raises existing concerns about the viability of the WTI contract as a benchmark and tool for risk management, say Barclays Capital analysts.

“Although we do not share the view that WTI is yet a completely broken benchmark, this move suggests that its relevance for financial market participants is waning in a similar way to what has already happened in the physical crude market,” it says.

While they don’t think fundamentals support a further widening of the WTI-Brent spread, Barclays analysts say the spread is extremely volatile and “there is risk that traders positioning around the scheduled rebalancing date in January could push these costs even higher.”

Brent crude was recently 2.4% higher at $111.87 a barrel, while Nymex crude was up 2.9% to $86.67.

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